Outlook uncertain for Shell’s return to the Chukchi

By Yereth Rosen: 3 Jan 2015

Six years after dropping more than $2 billion on leases in the remote Chukchi Sea off northwestern Alaska, Shell has yet to drill into any oil in that icy frontier.

Plans for an audacious offshore Arctic exploration program have been stymied by litigation and adverse court rulings and a string of accidents, mishaps, mistakes and some legal violations.

But the company is seeking to make up for lost time in 2015. After scrapping plans to drill in 2014 — a decision made necessary by a federal appeals court ruling in January that found regulators had failed to properly evaluate environmental impacts of the 2008 leasing — Shell has a new and much more aggressive exploration plan it hopes to make a reality this year.

Shell’s plan is to have two oil rigs drilling simultaneously in the Chukchi, completing six wells there over multiple seasons.

The trouble-plagued Noble Discoverer would be one of those rigs, even after owner and operator Noble Drilling pleaded guilty to eight felony offenses that resulted from what prosecutors described as a dysfunctional 2012 season from start to finish. Having forked over $12.2 million in fines and community payments, Noble — now under criminal probation and associated enhanced oversight — says it has reformed its operations and repaired its equipment.

Shell — though it has now spent about $6 billion in all on its Alaska program — has yet to fully commit to drilling again in the Chukchi.

“We continue to take a methodical approach. Any final decision to go forward will depend on successful permitting, clearing any legal obstacles and our own assessment that we are prepared to explore safely and successfully,” company spokeswoman Megan Baldino said in an email Friday.

The company has improved its operations in preparation for a 2015 go-ahead, Baldino said.

“We’ve taken a critical look at all of the experiences we’ve had in Alaska over the last several years and our latest exploration plan takes those learnings into account,” she said in her email.

There is “more emphasis on integrated planning and additional marine protocols,” she said. “The Alaska program has also been bolstered with additions to the fleet including the semi-submersible Polar Pioneer rig to replace the Kulluk, upgraded capabilities for the Discoverer rig, two additional tow vessels, larger offshore supply vessels and a third anchor-handler.”

Whether Shell does drill in 2015 depends, in part, on the Bureau of Ocean Energy Management completing a new revised supplemental environmental statement on Chukchi leasing — a document that should have been completed prior to the 2008 lease sale — and winning court approval of it, in accordance with the 9th Circuit ruling issued a year ago.

The 9th Circuit could throw up another legal hurdle. It is expected to rule soon on a legal challenge by environmentalists to regulators’ approval of Shell’s oil-spill plans for both the Chukchi and the Beaufort. The U.S. Bureau of Safety and Environmental Enforcement approved those plans in 2012; U.S. District Court Judge Ralph Beistline upheld those approvals in 2013, and the 9th Circuit Court in August heard oral arguments on the environmentalists’ appeal.

“At some point, even Shell will have to decide to stop throwing good money after bad in the U.S. Arctic Ocean,” said Michael LeVine, senior Pacific counsel for Oceana, one of the environmental groups that have filed lawsuits challenging the drilling program.

Shell — which has “simply has underestimated the difficulty there is or overpromised what it can do” — might repeat history, when it and other companies abandoned big offshore drilling programs in a low-oil-price environment decades ago, LeVine said.

“There were billions of dollars invested in the Beaufort and the Chukchi in the 1980s and ’90s, and companies still walked away,” he said.

Alaska politicians and business leaders continue to be gung-ho about Shell’s drilling plans. A joint venture with Arctic Slope Regional Corp. and other Native corporations, announced on July 31, would spread the economic rewards of drilling, business leaders say.

The Alaska state treasury would not get any of those rewards under current fiscal systems. Should oil ever flow from the Chukchi leases, there would be no state royalty or oil-production revenues, according to current laws.

Production and oil prices are now so low that the state is facing a $3.5 billion budget shortfall. Production that averaged 531,000 barrels per day in 2014 is expected to dip to an average of 509,000 barrels a day by the time the current fiscal year is over, according to the state’s revenue projections.

There are not even any assurances that Chukchi oil would reach state territory to help fill the trans-Alaska pipeline, which is shipping a dwindling supply of North Slope oil.

As for Shell’s Beaufort leases, which are located closer to TAPS and the existing oil infrastructure, the company has temporarily shelved its drilling plans to focus on the Chukchi, which is believed to hold more oil.

The company made a pitch in July to federal regulators to effectively extend the Beaufort leases, for which Shell spent about $84 million in 2005 and 2007, and to do the same for the Chukchi leases, which have already been extended because of the court rulings concerning the 2008 lease sale.

“Circumstances Shell could not have anticipated at the time it acquired its leases significantly impede Shell’s utilization of its lease rights to proceed with exploration and development of its Alaska leases before they are due to expire,” Shell’s Alaska vice president, Pete Slaiby, said in a July 10 letter to the Bureau of Safety and Environmental Enforcement.

The letter from Slaiby does not mention the Kulluk grounding in its list of impediments to drilling.

"Equal opportunity means that all people will be treated equally or similarly and not disadvantaged by prejudices or bias. This means that the best person for a job or a promotion is the person who earns that position based on qualifications, experience and knowledge. Workplace diversity values everyone's differences."

Apparently, with Shell HR this applies even if convicted of aggravated child sex offences on multiple counts with an appearance on the Sex Offenders Register.

It does make the workplace uncomfortable for everyone who has contact with him. On the other hand, he has to work somewhere or otherwise conviction would amount to a life sentence for repellent acts carried out 14 years ago.

Is it a praiseworthy policy or an act of folly to hire and promote such individuals? Or an act of negligence if HR pleads ignorance of his past criminal history? The latter seems unlikely bearing in mind that his past is common knowledge among colleagues and apparently, even suppliers.

John Donovan: RECEIVED FROM A SHELL INSIDER SOURCE

"INTEGRITY OF LEADERSHIP" ...as a Shell staff member, I am always concerned about the integrity of the leadership team at any level. ...there is a recently promoted individual in a key leadership role. Staff are not happy working for this person as he is a registered sex offender since 2004 for aggravated sexual assault against a child. xxxxxxx website has his full profile including yearly pictures. All verifiable in the public domain. ...but for some reason management are turning a blind eye. It says a lot for the company! His conviction lists his full name as.............. You can confirm the Shell link via xxx. He works for Shell xxxxxx. Staff are appalled that he has now promoted in a key leadership role working with suppliers like xxxxxxx to improve the quality of services provided to Shell. Some suppliers are now also beginning to learn his history and quietly voicing surprise." (Some of the above information has been redacted by John Donovan. The name of the relevant individual in a Shell leadership role has been verified from court records and social media)

Bonus Group: Exshellman speaks of 'The BG merger for many was a final nail in the coffin, some of the hand picked people for the new club don't know their arse from their elbows.' This could not be more appropriate than for the Brasil Asset which is probably currently plotting its next fraud against Petrobras. These miscreants should be flushed out of the system, but are probably biding their time and counting their share options waiting for them to vest, and also waiting for their next bonus to be announced before considering jumping ship. They make little to no valid contribution to the Asset. Let's hope that their commutes are long and arduous, though most of them have probably weaselled a 'working from home' option, from where they do little work and can make endless cappuccinos at the shareholders expense!

Bonus Group: That well known Schlumberger ex-Chief with 'operations experience', Andrew Gould (Mr Corridor having seen fit to distance himself from the BG Group debacle) is now in the news as Chairman of a Houston based outfit called Sentinel, a blank-check company . The latter having struck lucky with a pipeline company called Strike in a $854MM deal. “If I take all my experience in the oilfield, I don’t think I see any other service segment which has been so outsourced as this one,” said Gould. Strike’s main focus will remain pipeline maintenance.
The deal comes less than a year after Sentinel raised $345 million in an initial public offering. The company, which up until now had no assets, was set up as a so-called special-purpose acquisition company, or SPAC.
Gould is returning to public life after helping orchestrate the sale of the failed BG Group to Shell for $54 billion in 2016. Let's hope that there is a knighthood in it for him!

Bogus Group: The release of the Shell Brent PSMR is shocking testimony of the culture these pathetic incompetents administered without challenge. When Shell was generating huge revenue for the treasury, the regulator, even government ministers had their heads in the sand and a lack of accountability meant they could move on to spread their malignance. Finlayson took his “talents” to BG, another company ruined by pathetic incompetents with the same DNA.

Brinded joined Network Rail who appointed Mark Carne, another Shell/BG stray, described in one tabloid as the “bungling rail chief”. It’s ironic he now talks about (Rail Engineer 27.09.18) joining from Shell “part of an industry with a strong safety culture” and being motivated by big businesses, which are “safety-critical”, with more waffle about safety leadership and safety performance.

Will someone ever be able to “drain the British swamp” of these conceited executives who disingenuously hide behind the “safety and good old business principle banners”, to further their greed and lust for power at whatever cost.

RETIRED OIM: Bill, now the full horror of your findings during the Expro audit have been made available via Johns’ web site I wonder what kind of reaction, if any, will be generated. In retrospect and with hindsight, publishing earlier might have sealed Brinded’s demise sooner and he would never have risen to an apparent level of “the untouchable”.

The Italians hopefully will ensure he will be disgraced never to be any where near a responsible position again.

Sad to think the MF will be drawing several million £ pounds a year in pension rights as well as the vast number of Shell shares he was allocated as a direct result of his dictatorial years of apparent criminal behaviour. Just one of people who turned Shell from a well respected Company who treated Staff as a precious asset to be nurtured rather than be coerced and then dumped at the first opportunity.

exshellman: After the Shell BG merger completed in 2016 , a lot of really good people lost their jobs , it was handled terribly by the HR dept and the so called 'General Managers' culled some of the best experts they had ...in less than a year of the redundancies Shell were struggling and now with the lack of expertise...they have had to take in contractors to fill staff positions ..within a year of the redundancies ... they could be liable if people took this issue up.. Also Shell were looking at hiring back some old boy network ...who are now pensioners to come back in as managers to help out with the problems ..LOL . they have so much dead wood staff on their books and the company is ran like a club. I'm glad to be away from the farce that Shell became , the malaise started around about 2004 when they began to lose the plot. The BG merger for many was a final nail in the coffin, some of the hand picked people for the new club don't know their arse from their elbows. The only way Shell actually make profits is when the oil price goes high... when Brent is low they can't compete within their quartile or peer groups. I'll keep abreast here on the blog

Contributor to this blog: I’ve just come across an article "Tips & Insights: A World-class Combination" about the proposed combination of Royal Dutch Shell, one of the largest companies in the world and 'best known for its gasoline stations' and BG Group, a natural gas specialist.

The article centres on Sarah Franklin, (BG chief counsel, with a list of responsibilities, including health and safety after her name), who would be BG’s legal lead for integration planning.

In the article she explains that emotional intelligence was pivotal to success. I find this strange, as emotional intelligence wasn’t an attribute in BG Group. Could this be integration jargon?

Franklin has apparently added other governance matters, including human rights and whistleblowing investigations to her legal skill set. She set up BG’s first whistleblowing program.

She has inherited a new team that focuses on complex safety and environmental issues. As noted in the article, in Shell Legal, many lawyers advise on safety and environmental matters but it didn’t have a global core of experts.

If you are a Shell employee, be extremely cautious about the content of the two preceding paragraphs. If you have concerns, especially those with a safety connotation and you wish to engage with her……….beware.

I’m sure other revelations will eventually surface.

Bogus Group: I listened to the then BG Group chief executive drool over the Petrobras ‘partnership’ at his award speech for GB Personality of the Year by the Brazilian Chamber of Commerce in 2013 (https://youtu.be/pfknsxjT2Rw). He described many extraordinary moments during this partnership, a relationship that had flourished with ‘mutual trust and respect and super giant discoveries’, which was going from strength to strength. He was looking to a very long future with many more Eureka moments for BG and its partners in the years and decades to come.
So why would they want to put such ‘jewel’ in the Shell crown and who was responsible for this? At that time did anyone envisage the fall from grace in the coming months and years? Since then there has been turmoil in both companies, what could possibly have gone wrong.
Insiders will know the answer.

Bonus Group: Andrew Gould, Chairman of the disgraced BG Group, who allegedly was seeking a knighthood by joining the company has gone to ground. Given his contractor mind set coupled with his training as an accountant does not bode well for the industry. His LinkedIn profile shows that he is still Chairman of BG Group, as well as being a Board Member (Non Executive!) of Saudi Aramco. Given that Saudi Aramco are going to drop their IPO, this could well leave 'Mr Corridor' twiddling his thumbs and wondering how he can manoeuvre back into a position where he can achieve his ambition of being knighted.

John Donovan’s ebooks

EBOOK TITLE: “SIR HENRI DETERDING AND THE NAZI HISTORY OF ROYAL DUTCH SHELL” – AVAILABLE ON AMAZONEBOOK TITLE: “JOHN DONOVAN, SHELL’S NIGHTMARE: MY EPIC FEUD WITH THE UNSCRUPULOUS OIL GIANT ROYAL DUTCH SHELL” – AVAILABLE ON AMAZON.EBOOK TITLE: “TOXIC FACTS ABOUT SHELL REMOVED FROM WIKIPEDIA: HOW SHELL BECAME THE MOST HATED BRAND IN THE WORLD” – AVAILABLE ON AMAZON.